http://www.insider.co.uk March 2020 INSIDER 109
WEALTH MANAGEMENT: Q&A COMMENT
Fraser Porter
Chief Executive Officer
Anderson Anderson & Brown
Wealth Ltd
T: 0131 357 6666
E: [email protected]
aabwealth.ukA well-structured financial plan
incorporating a well-balanced long-term
investment approach, should provide you
with confidence in your financial future.
However, even with the most robust
and well thought through plan, human
nature can sometimes make us consider
the short-term noise that all too often
exists around investment markets.
Most investors generally know that
with time they are likely to pick up a
premium for owning equities relative to
holding cash or bonds. Most investors
also know that time helps to turn bad
short-term market positions into positive
long-term outcomes.
Additionally, most investors know that
it is costly to buy and sell investments,
incurring tax and transaction costs, and
that ‘timing the market’ is extremely
difficult.
Despite all the evidence, investors
can still get spooked by the noise
and uncertainty that they face in
the markets.
2019 saw a lot of noise surrounding
Brexit uncertainty, the US and China
trade war, and tensions with North
Korea, and yet, in spite of all this, the
equity markets in the UK and US saw
positive returns – the FTSE 100 generated
a double digit return and the S&P 500
posted 26 all-time high closing prices
levels in 2019.
2020 has started with the outbreak
of the coronavirus, which has resulted
in significant declines in investment
markets across the globe.
Here comes the market noise again...
but instead of focusing on this, let’s have
a look a historical trends.
Historical data tells us that over longer
time horizons, the odds of realised stock
returns being positive increases.
This is a key reason why it is important
to take a long-term view on investing.
In reality, investing is about what we
want to happen in the long-term, not
what happens day-to-day.Q: Your firm launched a new sustainable
investment service last year. Why?
Sustainable investing is having its moment. A
World Economic Foundation survey of global
decision-makers found for the first time in 2020
that the top five risks facing the world over the
next 10 years are all environment-related.
The debate has rapidly moved from whether
climate change is real to how fast and how
radically we need to act on it. Teenage activists’
voices have been joined by governments, bank
governors, scientists, celebrities and CEOs in
warning against not taking action. The impetus
to invest responsibly has continued to build.
We have historically had a small number
of clients who wished to invest ethically,
but the market did not offer the same
diversification, risk management and resources
as to traditional investors. With older, affluent
clients passing wealth down the generations,
we thought the time was right to provide
discretionary managed, risk-aligned multi-
asset portfolios to clients wishing to invest
responsibly.
Q: How did you go about it?
We outsource investment decisions to well-
established, expert discretionary investment
managers. Each manager is given a specific
mandate to work to, aiming for a certain level of
return and a maximum level of risk.
We researched managers who could deliver
our investment mandates but also embraced
the potential benefits of investing responsibly.
We ultimately decided to work with the
sustainable investing team at Canaccord
Genuity.
Our range of portfolios and managers is
wide enough to ensure an investment style,
cost structure and level of sophistication or
simplicity to suit clients’ varying needs. Our
Responsible Futures portfolios offer responsible
investment across all asset classes, investing
in companies that are mindful of their impact
on the environment and community, and
follow business practices that are fair and
non-discriminatory. They also apply a thematic
approach, targeting companies which are
developing ground-breaking solutions to solve
the world’s problems, such as overcrowding,
pollution, climate change, inequality and
shortage of resources.
Q: Does this mean sacrificing returns?
Investing responsibly doesn’t mean a reduction
in performance, with companies that are
well governed or aligned with sustainable
solutions tending to be more successful. Many
more product providers are offering ethical or
responsible investment options and regulators
are seeking to make sustainable investment
easier for investors to understand.
There is growing awareness climate change
can adversely impact investments in many
ways, whether it is damage to infrastructure
by fire or flood or the devaluation of assets
due to control of CO2 emissions. Making an
investment ready now for changes to come
offers the potential to benefit from the ‘early
bird’ effect. The long-established benefits of
‘pooling’ also come into play. Even the smallest
investors can pool their savings with others in
collective funds and shareholder groups that
can bear influence on companies they invest in.
Q: How do you see this developing?
It is possible the financial services industry will
be required to take the steps we have already
taken voluntarily. Our regulator is considering
compulsory questions about a client’s wish
to invest responsibly and pension schemes
of a certain size already have to consider
environmental, social and governance (ESG)
factors in their investment principles.
Since launching Responsible Futures, we
have invested millions of pounds responsibly
for our clients. Investments could persuade a
board to discontinue irresponsible resource
use, encourage it to appoint a senior female
executive, or develop renewable energy
resources. The market will continue to grow
in size and impact, and the year when the UN
Climate Change Conference (COP 26) takes
place in Glasgow is a great time to allocate
ideas and energy to this. ■Jason Hemmings is a partner at Cornerstone Asset
Management.JASON HEMMINGS Cornerstone Asset Management
in association withQ&A
Staying the course